By Peet Serfontein & Zimele Mbanjwa.
Home Depot is a renowned home-improvement retailer based in the US. The company sells a wide range of hardware, maintenance, décor, and construction-material products. Other offerings include installation services for Do-It-For-Me (DIFM) customers, as well as equipment rentals for Do-It-Yourself (DIY) and professional customers.
Considered a dominant force within the North American retail market, Home Depot operates more than 2 335 stores in the US, Puerto Rico, Guam, the Virgin Islands, Canada, and Mexico. This store footprint is complemented by a rapidly growing e-commerce platform.
Technically, the stock is trading in a developing symmetrical triangle pattern (see the black converging trendlines on the main chart as well as the insert). When the price breaks out of the triangle in the direction of the prior trend, it suggests the continuation of the upward movement. In an uptrend, this accumulation often indicates that buyers are gaining control, preparing for the next leg higher.
The stock seems to be in a markup phase characterised by steady price appreciation following an extended period of accumulation by investors. This is supportive of a bullish view.
The stock recently crossed above its 200-day simple moving average (SMA) of ~$336, signalling a bullish shift in its price trend.
Our bullish bias is supported by fading downside momentum according to the Moving Average Convergence Divergence (MACD) indicator, as well as recent sideways movement of the On-balance Volume (OBV) indicator.
Share Information
| Share Code | HD US |
|---|---|
| Industry | Consumer Discretionary |
| Market Capital (USD) | 350.9 billion |
| One Year Total Return | 20.88% |
| Return Year-to-Date | 3.42% |
| Current Price (USD) | 353.87 |
| 52 Week High (USD) | 396.87 |
| 52 Week Low (USD) | 274.26 |
| Financial Year End | January |
| The share price has had a solid previous 12 months, with several technical indicators suggesting continued upside potential. |
Consensus expectations
(Bloomberg)
| FY24 | FY25E | FY26E | FY27E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 15.11 | 15.40 | 16.35 | 17.42 |
| Growth (%) | 1.93 | 6.14 | 6.56 | |
| Dividend Per Share (USD) | 8.36 | 8.98 | 9.59 | 10.17 |
| Growth (%) | 7.43 | 6.81 | 6.01 | |
| Forward PE (times) | 22.98 | 21.65 | 20.31 | |
| Forward Dividend Yield (%) | 2.54 | 2.71 | 2.87 | |
| Operating and economic pressures are expected to weigh heavily on growth in FY25. Once this subsides however, the company should make a decent recovery. | ||||
Buy/Sell Rationale
Technical Analysis:
Long-term fundamental view:
| Share Name and position | META US - BUY (Continue to hold) |
MO US - BUY (Continue to hold) |
PNW US - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 474.36 | 43.54 | 73.02 |
| Current | 499.49 | 44.80 | 74.74 |
| Movement | +5.3% | +2.9% | +2.4% |
|
The stock still presents as a tactical speculative buying investment opportunity. It remains above its 200-day SMA. Fading downside price momentum is supportive of our bullish stance.
Our profit target is $555, with a trailing stop-loss of $467. Exit the trade by 19 September 2024. |
The formation of a falling wedge pattern is attractive. The stock remains above its 200-day moving average. Fading upside price momentum is a concern.
Our profit target is $48, with a trailing stop-loss of $43.15. Exit the position around 19 July 2024. |
A developing symmetrical triangle remains of interest. The stock remains above its 200-day moving average. Fading upside price momentum is a concern.
Our profit target is $81, with a trailing stop-loss of $71.60. Exit the trade by 5 July 2024. |
| Share Name and position | T US - Buy (Continue to hold) |
BLK US - Buy (Continue to hold) |
PYPL_US - Stop Loss (Close the position) |
|---|---|---|---|
| Entry | 17.62 | 766.62 | 67.02 |
| Current | 18.05 | 783.65 | 61.54 |
| Movement | +2.4% | +2.4% | -8.2% |
|
A price testing the upper range of a declining channel pattern remains of interest. The stock remains above its 200-day simple moving average. Upside price momentum has regained some strength.
Our profit target is $20, with a trailing stop-loss of $17.40. Exit the trade by 23 August 2024. |
The formation of a symmetrical triangle pattern within an uptrend is attractive. The stock remains above its 200-day moving average. Fading downside momentum is supportive.
Our profit target is $849, with a trailing stop-loss of $749. Exit the trade by 31 July 2024. |
The stock has breached our stop-loss level and we closed the position on 13 June 2024. |
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